has outlineddetails of how its "Ambition Stratégique 2020" will rely on itsinsurance business to deliver growth at a time of shrinking returns on thebanking business.
FrédéricThomas, CEO of Crédit AgricoleAssurances, said much of the growth will come from the sale ofunit-linked products, Les Echosreported March 29. As a share of total assets, Thomas wants to increase suchproducts to 25% from 20%. Total assets are expected to rise by 10% between 2015and 2019, he said, to €285 billion.
Itwill be looking to make space for itself in a crowded field. Many Europeaninsurers concerned about the increased capital requirements for guaranteedproducts are looking to sell more unit-linked products, which are not subjectto such stringent regulations.
However,customers in France, Germany and other countries have not shown themselves tobe especially keen on these products, forcing insurers who want to maintainmarket share to continue providing the capital-intensive guaranteed variety.
Still,Crédit Agricole Assurances is hoping to double its share of the workplace pensionsbusiness to 16% by 2019, Thomas said. To achieve this, it is expected to leanon its subsidiary Amundi, which has a strong position in the market,according to Les Echos. Amundirecorded net inflowsof €80 billion in 2015, equivalent to 9% of AUM at the beginning of that yearand the highest figure since its creation in 2010. Over the 2015to 2019 period, Crédit Agricole is hoping to maintain its 18% share of the personallife insurance market.
The impact of low rateson safe assets
Insurersare also struggling to attract investment despite their products offeringhigher rates than bank accounts. In an interview, Shailesh Raikundlia, ananalyst at Haitong Research, noted that the difference is only marginal.
"[Customers]end up having a lot of cash. In a low interest rate environment, people expectthat many insurance and other products will be sold but it has not proved to bethat way," he said. Given the "minute" increases in returns,"many people do not bother."
In areport published in February, Fitch warned that French insurers will continue to face atough operating environment because of the low rates. Despite improving theirbusiness mix toward unit-linked products in 2015, it noted that their exposureremains skewed toward guaranteed products. The rating agency said it expectsinsurers to continue trimming crediting rates in 2016 as they attempt tomaintain business volumes and competitive expense ratios.
Backing away from banking
Therestructuring of Crédit Agricole's business in February emphasized an increasedreliance on fund management and insurance, leading some analysts to suggest thegroup could now be more easily compared to a bancassurer like than and , its closestrivals in the French banking market.
Accordingto data from SNL Financial, a part of S&P Global Market Intelligence,Crédit Agricole Assurances is France's third-largest insurer by assets andgross written premiums, behind only AXA and CNP Assurances SA.
CréditAgricole's restructuring is expected to raise its common equity Tier 1 ratio to11%, giving it a 150-basis-point buffer above its Pillar 2 requirement. CEOPhilippe Brassac said in February that "capital is no longer an issue"at the bank.
AlainTchibozo, a bank analyst at Mediobanca, said in an interview that he expectedCrédit Agricole to gain market share in insurance thanks to its excess capital,while he saw BNP Paribas losing market share for the same reason. He said hedoes not expect the French to invest heavily in unit-linked insurance giventheir aversion to equity investment.
Themove away from its regional banking business means that Crédit Agricole is alsoincreasing its reliance on its corporate and investment bank, one analystpreviously told S&P Global Market Intelligence. There were also concernsabout the loss of stable income from the regional banks, which in 2015contributed €1.1 billion in net income out of a total of €3.5 billion.